World fears US default, Obama warns

October 9, 2013 1:28 pm
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Furloughed federal workers protest outside the U.S. Capitol to demand an end to the lockout of federal workers caused by the government shutdown October 4, 2013 in Washington, DC/AFP
Furloughed federal workers protest outside the U.S. Capitol to demand an end to the lockout of federal workers caused by the government shutdown October 4, 2013 in Washington, DC/AFP

, Washington October 9 – President Barack Obama warned that world leaders were nervous Republicans would “blow up” the US economy, and vowed not to budge on his demand for the debt ceiling to be lifted without conditions.

But House Speaker John Boehner insisted there would be no “unconditional surrender” from Republicans and said Congress would only allow more US borrowing if Obama agrees to cut spending.

There was, however, one glimmer of hope for progress in the bitter showdown that has closed the US government for more than a week and sparked fears that Washington could default on its commitments if the debt ceiling is not raised by October 17.

Obama said that, if necessary, he would accept a short-term deal to raise borrowing and reopen the government a move that would effectively postpone the crisis for a number of weeks.

But the president was adamant that he would not compromise on his refusal to cede ideological concessions to Republicans in return for receiving more authority to borrow money to finance US obligations.

“What you haven’t seen before, I think, from the vantage point of a lot of world leaders, is the notion that one party in Congress might blow the whole thing up if they don’t get their way,” Obama said at a White House news conference designed to hike pressure on Republicans.

“They’ve never seen that before. And that does make them nervous.”

Obama spoke a day after China, which is sitting on a vast pile of US Treasury bonds, warned that the time was running out for the United States to prove its credit worthiness and the credibility of the world’s reserve currency.

Stocks in New York dipped for another day Tuesday, with investors increasingly concerned that the government will not get its act together in time.

The Dow Jones Industrial Average fell 159.71 points (1.07 percent) to 14,776.53 and the tech rich Nasdaq Composite Index plummeted 75.54 (2.00 percent) to 3,694.83.

Investors also sold off short term bonds, sending the yield on the one month Treasury note to 0.31 percent, its highest level since the crisis year of 2008, up from 0.15 percent Monday.

Obama said Congress had two basic jobs passing a budget and “making sure that America’s paying its bills.”

He warned that lawmakers did not get to demand a ransom, and reiterated his position that he would only negotiate with Republicans once the debt ceiling was raised and the government, now shuttered for a week, is opened.

“I’m not budging when it comes to the full faith and credit of the United States.”

Boehner appeared on television soon after Obama’s news conference to dig further into his own position.

“The long and short of it is there is going to be a negotiation here,” Boehner said.

“We can’t raise the debt ceiling without doing something about what’s driving us to borrow more money and to live beyond our means.”

“What the president said today was if there’s unconditional surrender by Republicans, he will sit down and talk to us,” he added.

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